2017 (3) TMI 1810 - AT - Companies Law

Oppression and mismanagement - Doctrine of Indoor Management - Validity of Board Meeting as well as the Extra-Ordinary General Meeting - HELD THAT - It is not in dispute that both the meeting of Board held 2.11.2010 and 10.12.2010 and the Extra-Ordinary General Meeting held on 17.3.2011 without notice and knowledge of the minority shareholders have been declared as illegal - The findings of the Tribunal to that effect is not under challenge in this appeal. In case of Oppression and Mismanagement it is open to the Tribunal to grant relief as per sub-section 2 of Section 242 of the Companies Act 2013 (equivalent to Section 402 of the Companies Act 1956). In view power vested under sub-section (2) of Section 242 of the Companies Act 2013 it is open to the Tribunal to decide as to what relief to be granted if it gives declaration of oppression and mismanagement . The Tribunal having power to declare an agreement invalid or void can set aside the same. The aggrieved party as a matter of right cannot claim to save any action or agreement following the Doctrine of Indoor Management . Appeal dismissed.

Summary

Issues Involved:
- Oppression and mismanagement in company affairs
- Validity of Board meetings and Extra-Ordinary General Meeting
- Declaration of agreement to sell as non-est
- Rights and interests of the appellant/fourth respondent
- Application of the Doctrine of Indoor Management
- Relief granted by the Tribunal under Section 242 of the Companies Act, 2013

Analysis:

1. Oppression and Mismanagement in Company Affairs:
The appeal was filed against the judgment of the National Company Law Tribunal, which allowed a petition under Sections 397, 398, and 402 of the Companies Act, 1956, regarding oppression and mismanagement of the company's affairs. The Tribunal found that the exclusion of petitioners from the company's affairs was deliberate and wilful, leading to the declaration of certain meetings and agreements as illegal.

2. Validity of Board Meetings and Extra-Ordinary General Meeting:
The Tribunal declared the Board meetings held on 2nd November 2010 and 10th December 2010, along with the Extra-Ordinary General Meeting on 17th March 2011, as not in accordance with the law. Consequently, resolutions passed in these meetings were deemed null and void, affecting decisions such as appointments and property negotiations.

3. Declaration of Agreement to Sell as Non-Est:
The agreement to sell a piece of land in favor of the fourth respondent/appellant was declared non-est in the eyes of the law due to the irregularities in the meetings and decision-making processes. However, the fourth respondent was granted the right to seek legal remedies before a civil court.

4. Rights and Interests of the Appellant/Fourth Respondent:
The appellant, who was the fourth respondent in the case, had reached an agreement with the company for the sale of land. The Tribunal considered the appellant's rights and interests in light of the declared invalidity of the agreement, allowing the appellant to pursue legal remedies independently.

5. Application of the Doctrine of Indoor Management:
The appellant argued for the application of the Doctrine of Indoor Management to protect their interests, citing a Supreme Court decision. The doctrine allows outsiders dealing with a company to presume that internal requirements have been properly observed, but exceptions exist in cases of suspicion or irregularity.

6. Relief Granted by the Tribunal under Section 242 of the Companies Act, 2013:
The Tribunal had the power under Section 242 of the Companies Act, 2013, to grant relief in cases of oppression and mismanagement. This included the authority to declare agreements invalid or void and to set them aside, as deemed necessary to address the matters complained of.

In conclusion, the appeal was dismissed by the Appellate Tribunal, upholding the findings of the National Company Law Tribunal regarding the illegalities in the company's affairs and decision-making processes. The judgment emphasized the importance of upholding legal procedures and protecting the rights of all parties involved, while also highlighting the powers of the Tribunal to address issues of oppression and mismanagement in corporate governance.